public funds -- to the tune of $20 million a year -- are being spent without the required approval of Parliament, according to the latest independent auditor's report.

The auditor, Mr. Larry Dennis, has warned of consequences that include reduced control over how much Government spends, potential improprieties and potential abuse.

Government officials have conceded that the practice may not comply with the law of the land and they launched a review to consider changes for the next fiscal year, starting on April 1, 1996.

An example of one scenario may be the Public Works Department selling more water to the public than usual, and using the increased revenue to buy more water trucks, without first asking for parliamentary permission.

Minister of Finance the Hon. David Saul said: "This has been going on for some time. We are reviewing it. A classic example may be the Community Education programme. If you go and take the courses, you pay a fee, which is credited to the programme.

"They use that to pay the lecturers. You can start by saying that you don't think that there is any problem of accountability to Parliament because it is a programme paid into under a grant.

"But we are reviewing it to make sure that all of the taxpayers' money is accountable. It is certainly a good thing to point out to us and it is something that we will be examining.'' The Bermuda Constitution Order and the Public Treasury Act require that all money paid out of the Government's bank account, the Consolidated Fund, must be approved by Parliament.

The latest report issued by Government auditor, Mr. Larry Dennis, for the year to March 31, 1990, indicates that $20 million in receipts, or Government revenue, was spent without authority from Parliament.

And it was estimated that "receipts credited to programme'', money going in and out of a Government department through a revolving door, averaged about $20 million during the five years to 1990.

The practice, said Mr. Dennis, of crediting receipts to programme often develops in response to a sense of pragmatism, convenience or efficiency.

"However,'' he pointed out, "along with these perceived advantages comes a reduction of budgetary control and accountability to Parliament.

"Further, the practice is open to improprieties and abuse. Indeed, under the Westminister system where Parliament must approve all expenditures out of the Consolidated Fund, the practice would usually be considered improper and the auditor would be placed on guard if evidence of the practice was discovered.

"In the Bermuda context the practice should be discontinued and departments should be required to budget in gross, including receipts with revenues and showing expenses at actual.'' He further argued that the Government should consider preparing a separate accounting for all revolving funds approved by the Legislature. It would lead to an enhancement of budgeting and operating controls.

Meanwhile, the Minister for Works & Engineering (W&E), the Hon. Leonard Gibbons said that problems identified by the auditor at his ministry have been rectified.

A review of procedures at W&E, the Public Transportation Board and the Post Office indicated that the computerised inventory system still did not produce reliable information, and, adequate controls had not been satisfactorily established during 1989-90.

As a result of the long running problem, the auditor reported: "These inventories, estimated in excess of $4,000,000, are therefore not included in the 1990 financial statements.'' Mr. Gibbons conceded: "There had been some problems here. They certainly have been rectified and I am satisfied with the controls that are in, now. Our controller is doing an excellent job.

"We're in top shape. I'm very confident of that.'' The auditor reported that Government has invested in an inventory package which is expected to be implemented as of April 1, 1996.